RBI proposes RTGS for dollar, euro and pound to expedite cross-border payments, remittances

Banks in India can soon settle transactions in the US dollars, euros and pound sterling with the Real Time Gross Settlement System (RTGS). The Reserve Bank of India (RBI) Governor Shaktikanta Das has proposed to widen the scope of RTGS in major trade currencies. The RBI’s aim is to give greater access to cheaper cross-border payments and remittances.

RTGS is a system where continuous and real-time settlement of fund-transfers are made, individually on a transaction-by-transaction basis (without netting). This system is used to transfer funds between banks on a real-time basis and is maintained by the RBI.

At present, RTGS is used to send amounts of Rs 2 lakh or more instantly from the remitter to the recipient’s bank, instead of grouping the payments in batches.

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What it means?

The proposal of expanding RTGS in global currencies would provide an alternative to RBI’s traditional cross-border tie-ups which depend on correspondent banking networks.

Under the existing mechanism, the conventional systems involve multiple intermediaries, leading to delays, higher costs, and increased complexity in settling transactions across different currencies.

What RBI has said?

“India is one of the few large economies with a 24x7 real-time gross settlement system. The feasibility of expanding RTGS to settle transactions in major trade currencies such as USD, EUR, and GBP can be explored through bilateral or multilateral arrangements,” Das said in his keynote address at the RBI@90 High-Level Conference, organised by the central bank in New Delhi on Monday.

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Das said that India and a few other economies have already started efforts to expand linkage of cross-border fast payment systems both in the bilateral and multilateral modes.

An expanding payment linking system

A report in The Economic Times said cross-border payment linkages under bilateral pacts have already been set up with Singapore, the UAE, Mauritius, Sri Lanka and Nepal.

The RBI in July unveiled Project Nexus initiative to interlink the domestic instant payment systems of India with Malaysia, the Philippines, Singapore and Thailand.

In his speech, Das also said that the central bank digital currencies (CBDCs), which are currently being tested with features like UPI integration and programmability, could work globally with standardisation and compatibility.

“A key challenge could be that countries may prefer to design their own systems based on domestic considerations. I believe we can overcome this by developing a plug-and-play system that replicates India’s experience while maintaining the sovereignty of respective countries,” the RBI governor said.

With inputs from agencies.